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Solo 401k CP 214 Notice: Much Ado About Nothing

posted on November 13, 2014

Whenever I get a letter from the IRS, my heart rate goes up. I’m afraid they are telling me something I don’t want to hear.

The latest letter from the IRS is quite strange. It’s about my solo 401k plan. For more background on solo 401k, see Solo 401k When You Have Self-Employment Income. The IRS letter tells me that I may have to to file a 5500-EZ on paper or a 5500-SF electronically for the plan year ending on December 31, 2014.

The filing isn’t due until July 31, 2015. Why do they remind me now in November, 8 months before it’s due? It’s way too early for a reminder.

I have been filing 5500-EZ. They know that. Why send reminders to people who already have been filing? It should be the opposite: remind people who haven’t filed. Of course if people have never filed, the IRS doesn’t know whether they have a solo 401k. So when they can’t reach out to people who really need a reminder, they just remind people who have already been doing it.

Now I see that enough people must be confused by this CP 214 notice. The IRS had to put up a FAQ page for it. It occurs to me it would be easier for all involved if the IRS didn’t send this reminder notice to begin with.

[Photo credit: Flickr user Jason Dean]

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Here’s their quick start guide for doing the electronic 5500-SF. You have to register, get a user ID, a PIN and a password, and follow a bunch of steps. For a simple form that takes no more than 5 minutes to complete, it’s just not worth it.

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